Safe Solicitation: Disclose More to Prevent E&O Lawsuits
Booby traps have been a part of war for centuries. They involve the setting of lures that the enemy hopes will attract their opponent. When the soldier touches the lure, the hidden bomb or other device goes off, killing or maiming the unwary soldier.
Now here’s the thing about booby traps. The devices themselves are often simple. But the logic behind them is cunning. In Vietnam, for example, the Vietcong noticed that American soldiers liked to kick empty soda cans lying on the ground. Soon, they began leaving devices in cans so they’d explode when kicked. Yet U.S. soldiers kept kicking cans.
Why discuss booby traps? Because we believe many financial professionals today engage in dangerous, noncompliant behavior that could literally blow up in their faces. Like American troops in Vietnam, they kick the same cans down the path, even though the industry environment has changed. They keep committing the same lies, errors and omissions, and shortcuts. But the problem is, kicking those cans will likely trigger “explosions” today because regulators have much less tolerance for can kickers.
What kind of booby traps are we talking about? There are four main types:
Solicitation traps: in connection with advertising or other prospect solicitation techniques.
Disclosure traps: regarding what you say and don’t say about your background and business.
Suitability traps: made as you decide which product or products to recommend to a client.
Servicing traps: after the sale, particularly relating to client privacy and data security.
To help you avoid these traps, this article and three others will show you how to be a smart “soldier” during the sales process. This is especially important as it relates to preventing client complaints and avoiding errors-and-omissions insurance claims.
Let’s start with solicitation:
- When promoting yourself, do it in a way that’s fair, accurate, and truthful. To save time, use company-approved materials. If you create your own, be sure to have them approved by your carrier.
- In writing or conversation, avoid prohibited terms like “account” and “deposits” when referring to life insurance or annuities.
- If you do cold calling, be sure to search the national Do Not Call Registry and any relevant state registry to make sure your prospects haven’t placed their names there.
- When you buy leads from a marketing company, ask about the practices that generated the leads. Don’t buy from a company that uses deceitful or non-compliant practices.
- When you create your own lead generation materials, make sure to disclose that you will be contacting the respondent.
- If you conduct seminars, always clearly identify the product to be sold and explain the nature of your business.
- Avoid all professional designations that lack substantial educational content and that appear to be just marketing gimmicks.
There are other techniques as well, which we can’t include due to limited space. But here’s the bottom line: To avoid booby traps during solicitation, don’t “kick the can”. Know the rules, tell the absolute truth, and be fair to your prospects. This will go a long way toward preventing legal disputes and large E&O settlements, which make E&O insurance more expensive for everyone.